The number of Americans filing new claims for unemployment benefits rose slightly last week, suggesting underlying strength in the economy at the end of the year.
The number of initial claims for state unemployment benefits increased by 2,000 to a seasonally adjusted 205,000 in the week ended Dec. 16, the Labor Department reported Thursday. Economists polled by Reuters had forecast 215,000 orders for the last week.
Although application data is volatile at this time due to the holiday season, They remain consistent with a fairly healthy labor market, which is expected to keep the economy out of recession next year.
A Conference Board poll on Wednesday showed that the share of consumers who believe employment is plentiful was the highest in December in five months.
Job applications data covered the week the government surveyed businesses for the nonfarm payrolls portion of the December report. Applications increased slightly between November and December.
The economy added 199,000 jobs in November, below last year’s monthly average of 240,000, but above the 150,000 jobs created in October.
The Federal Reserve held interest rates steady last week and in its new projections noted that the historic monetary tightening of the last two years has come to an end and in 2024 borrowing costs will be reduced. Since March 2022, the entity has increased its official rate by 525 basis points, to the current range of 5.25%-5.5%.
Next week’s data on the number of people receiving benefits after an initial week of aid, a proxy for hiring, could shed more light on the fate of the labor market in December. In the week ending December 9, the number of applications for continued subsidy fell by 1,000, to 1.865 million.
Continuing claims have increased mostly since mid-September, largely due to difficulties adjusting data for seasonal fluctuations following an unprecedented surge in benefit claims early in the COVID-19 pandemic.
Economists expect the distortion to relax when the government reviews the data next year. The strength of the labor market is boosting consumer spending, which is keeping the broader economy afloat. In another report on Thursday, the government confirmed that economic growth accelerated in the third quarter.
Gross domestic product rose at an annualized rate of 4.9% last quarter, revised downward from the previously reported 5.2% pace, the Commerce Department’s Bureau of Economic Analysis (BEA) said in its third GDP estimate for the third quarter.
It remains the fastest pace of expansion since the fourth quarter of 2021. Economists expected GDP growth to remain unchanged at 5.2%.
The economy, which grew at a pace of 2.1% in the second quarter, has been expanding at a pace well above what Fed officials consider the non-inflationary growth rate of about 1.8%. . However, Momentum appears to have faded in the final three months of the year, as consumer spending takes a breather.
Growth is also expected to be slowed by a larger trade deficit and a slower pace of inventory buildup relative to the third quarter.
However, the pace of expansion is likely still enough to avoid a recession, as retail sales unexpectedly rose in November and single-family housing starts and building permits hit 1-1/2-year highs. Growth estimates for the fourth quarter range between 1.1% and 2.7%.
